Prohibition Does Not Work

Jeffrey Miron: Drugs and Violence

Recent estimates suggest thousands have lost their lives in this "war on drugs."

The U.S. and Mexican responses to this violence have been predictable: more troops and police, greater border controls and expanded enforcement of every kind. Escalation is the wrong response, however; drug prohibition is the cause of the violence.

Prohibition creates violence because it drives the drug market underground. This means buyers and sellers cannot resolve their disputes with lawsuits, arbitration or advertising, so they resort to violence instead.

Violence was common in the alcohol industry when it was banned during Prohibition, but not before or after.

Violence is the norm in illicit gambling markets but not in legal ones. Violence is routine when prostitution is banned but not when it's permitted. Violence results from policies that create black markets, not from the characteristics of the good or activity in question.

The only way to reduce violence, therefore, is to legalize drugs. Fortuitously, legalization is the right policy for a slew of other reasons.

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Prohibition Ends 12/5/1933

Americans will Friday toast the 75th anniversary of the end of Prohibition, a dry spell that began in 1920 when a constitutional amendment outlawed alcohol throughout the United States.

The nationwide ban on the manufacture, sale, transportation, import and export of intoxicating beverages was brought into law by conservatives for moral and health reasons, and repealed in 1933 on economic grounds.

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Despite pleas throughout the 1920s by journalist H.L. Mencken and a tiny handful of other sensible people to end Prohibition, Congress gave no hint that it would repeal this folly. Prohibition appeared to be here to stay -- until income-tax revenues nose-dived in the early 1930s.

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75th Anniversary: Re-Legalization of Beer

Breweries and beer lovers around the country are celebrating the 75th anniversary of the return of beer on April 7, 1933, as the Prohibition era was drawing to a close...

What became available that day was only 3.2 percent alcohol by weight (compared with up to 5 percent in full-strength beer), but still, it was a step up from the virtually alcohol-free "near beer" that had been sold since 1920...

Together they fulfilled their first campaign promise with passage of the Cullen-Harrison Act, which increased the amount of alcohol allowed in beverages from 0.5 percent to a discernible 3.2 percent by weight...

"April 7th was really just ... FDR looking for an economic shot in the arm," Skilnik said. "And it was a very successful shot in the arm. There was a hell of a lot of money spent." He said $25 million was pumped into breweries and associated businesses -- helping farmers, truckers, and glassmakers as well as brewers and pubs -- in the first 48 hours of sales.

And that was good for cash-strapped governments, too.

"Everybody [in government], for the first time, started to wrap their heads around the notion that this is something that you could tax," he said.

The first day of beer sales reaped $7.5 million in tax receipts for the U.S. Treasury, he noted.

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Economic Impact

Today, our industry contributes nearly $190 billion annually to the U.S. economy and provides more than 1.7 million jobs to our nation’s workforce. source

Prohibition Politics by Donald Boudreaux

What happened in 1930 that suddenly gave the repeal movement political muscle? The answer is the Great Depression and the ravages that it inflicted on federal income-tax revenues.

Prior to the creation in 1913 of the national income tax, about a third of Uncle Sam's annual revenue came from liquor taxes. (The bulk of Uncle Sam's revenues came from customs duties.) Not so after 1913. Especially after the income tax surprised politicians during World War I with its incredible ability to rake in tax revenue, the importance of liquor taxation fell precipitously...

Before the income tax, Congress effectively ignored such calls because to prohibit alcohol sales then would have hit Congress hard in the place it guards most zealously: its purse. But once a new and much more intoxicating source of revenue was discovered, the cost to politicians of pandering to the puritans and other anti-liquor lobbies dramatically fell.

Prohibition was launched...

From 1930 to 1931, income-tax revenues fell by 15 percent.

In 1932 they fell another 37 percent; 1932 income-tax revenues were 46 percent lower than just two years earlier. And by 1933 they were fully 60 percent lower than in 1930.

With no end of the Depression in sight, Washington got anxious for a substitute source of revenue.

That source was liquor sales...

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My comments: Follow the money.

Why did Prohibition End? Tax Revenue Needed

An interesting argument.

Read the article.